U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                  ------------


                                   FORM 10-KSB
                                  ------------


            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31,1997

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                        Commission file number 33-30365-C
                                             ------------


                        EMERALD CAPITAL INVESTMENTS, INC.
           (Name of Small Business Issuer as specified in its charter)
                     
                  Delaware                         36-36939936
          ------------------------------         ----------------
         (State or other jurisdiction of         (I.R.S. employer
          incorporation or organization)          identification No.)
          330 East Main, Suite 206                    60010            
              Barrington, Illinois                  ---------
          ------------------------------            (Zip Code)
          (Address of principal executive
           offices)


         Issuer's telephone number, including area code: (847) 516-2900
                                  ------------


     Securities registered pursuant to Section 12(b) of the Exchange Act:  None

     Securities registered pursuant to Section 12(g) of the Exchange Act:  None


      Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange  Act during the  preceding 12 months (or for
such shorter period that the registrant was required to file such reports),  and
(2) has been subject to such filing  requirements for the past 90 days. Yes X
No ___.

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained, to the best of Issuer's knowledge, in definitive proxy or information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. X

     The Issuer's  revenues for the fiscal year ending December 31,1997 were $0.

     As of March 31, 1998,  there were 6,608,698  shares of the Company's common
stock issued and outstanding of which 4,301,479 were held by non-affiliates.  As
of March 31,1998 there was no active market for the Company's common stock.

                    DOCUMENTS INCORPORATED BY REFERENCE: NONE

 .





<PAGE>



                                       PART I

ITEM 1. DESCRIPTION OF BUSINESS

General

      Emerald Capital Investments, Inc. (the "Company") is currently an inactive
publicly  held  company  which  intends to attempt to commence  active  business
operations  by acquiring an operating  company.  The Company has entered in to a
non-binding Letter of Intent to acquire a privately-held corporation in a merger
transaction.  The Company has not entered into a definitive merger agreement and
there can be no assurance  that the Company will complete such proposed  merger.
The Company has conducted no operations since December 31, 1995.

      During  the year  ended  December  31,  1997,  the  Company  conducted  no
operations and generated no revenue.  The Company has no current  operations and
is seeking to enter into active  business  operations  by acquiring  one or more
other operating companies.

      The information  contained herein relating to the historical operations of
WRTI and CTR is no longer a current  description of the Company's  business plan
and is included solely for historical information.

History of the Company

      The Company was formed  March 22, 1989 for the purpose of investing in any
and all types of assets,  properties and businesses.  Pursuant to a registration
statement  which was  declared  effective  on  December  19,  1989,  the Company
registered  5,000,000 Units of its securities to be offered and sold in a public
offering.  The  offering  was closed on April 17, 1990 and a total of  1,315,600
Units were sold.  The net offering  proceeds were  approximately  $102,052.  The
offering was a "blind  pool" or "blank  check"  offering.  Each Unit sold in the
public  offering  consisted of one share of common  stock,  one Class "A" common
stock  purchase  warrant and one Class "B" common stock  purchase  warrant.  The
Warrants  expired June 30, 1993 without being  exercised.  In 1992,  the Company
effected a 1-for-10  reverse split of its then issued and outstanding  shares of
common stock.

      Prior to its  acquisition  of WRTI,  the  Company  attempted  to acquire a
number of businesses and attempted to commence business  operations in different
industries.  However,  the Company was  unsuccessful  in such previous  business
operations.

      In 1992, the Company  acquired an Area  Development  Franchise to open and
operate Ho Lee Chow restaurants in DuPage County and Kane County,  Illinois.  In
September 1993, the Company sold its Ho Lee Chow related assets in consideration
for the  transfer to the Company of  2,612,500  shares of the  Company's  common
stock  owned by the  individuals  comprising  the  group of  purchasers  and the
cancellation of options to purchase 300,000 shares of the Company's common stock
owned  by the  purchasers.  The  purchasers  also  assumed  certain  liabilities
relating to the Ho Lee Chow assets and operations.

                                      2

<PAGE>



From March 1994 to December  29,  1995 the  Company,  through its  subsidiaries,
Waste Reduction Technologies,  Inc. ("WRTI") and Continental Tire Recycles, Inc.
("CTR"),  was engaged in the business of designing,  manufacturing and marketing
waste  reduction  equipment  (primarily  shredding  machines) and collecting and
recycling used tires.  The Company  acquired WRTI in March 1994. WRTI was formed
in 1993 and at the time of the acquisition,  WRTI's  activities had been limited
to  developing  a  business  plan  and  designing  various  shredding  equipment
products.  The products offered by WRTI included a variety of sizes of shredding
machines  and waste  reduction  systems  designed  to meet the needs of specific
customers.

      In May, 1994 the Company formed CTR as a wholly-owned subsidiary.  CTR was
engaged in the business of collecting and recycling used tires.

      The WRTI and CTR operations  never  generated  significant  revenue,  were
capital  intensive  and resulted in  significant  losses to the  Company.  As of
December  1995,  the  Company had  exhausted  all of its  working  capital,  had
exhausted  its  ability  to borrow  funds and was  unable to  continue  with the
operations of WRTI and CTR. On December 29, 1995,  the Company sold WRTI and CTR
to a group of  purchasers  which  included  a  former  member  of the  Company's
management.

      On December 29,  1995,  the Company sold all of its shares of WRTI and CTR
to a group of 20 buyers  ("Buyers").  One of the Buyers was William G. Holmes, a
former  officer and director of the Company.  The purchase  price for all of the
shares of WRTI and CTR sold by the Company to the Buyers was $30,000.  The total
liabilities  of  WRTI  and  CTR  as  of  December  29,  1995  was  approximately
$1,758,308,  including bank debt of $250,000 and approximately  $394,950 owed to
six individual lenders, including the Company's president and secretary.

Current Business Plan

      The Company believes that in order to commence active operations,  it must
acquire an operating company. The Company has entered into a Letter of Intent to
acquire a  specialty  chemical  company in a merger  transaction  (see  "Item1 -
Letter of  Intent").  If the  merger  described  in the  Letter of Intent is not
completed,  the Company will continue to look for other  possible  acquisitions,
("Potential  Business  Opportunity").  The merger  transaction  described in the
Letter of Intent requires the Company to raise additional  capital.  Even if the
proposed merger is not completed, it is likely that the Company will be required
to raise additional funds in order to attract a Potential Business  Opportunity.
There can be no  assurance  that the  Company  will be able to raise  additional
capital in  sufficient  amounts  to enable it to  acquire a  suitable  Potential
Business Opportunity.

      In some  instances,  a  Potential  Business  Opportunity  may  involve the
acquisition  of or merger  with a  corporation  which does not need  substantial
additional  cash but which desires to establish a public  trading market for its
Common Stock. Some companies with Potential  Business  Opportunities may seek to
become a public company through merging with, being acquired by or selling their
assets to an existing public company. There are numerous reasons why an existing
privately-held company would seek to become a public company through a merger or
acquisition

                                      3

<PAGE>



rather than doing its own public  offering.  Such reasons  include,  but are not
limited to, avoiding the time delays involved in a public offering;  retaining a
larger share of voting control of the publicly-held  company;  reducing the cost
factors  incurred  in  becoming a public  company;  and  avoiding  any  dilution
requirements set forth under various states' blue sky laws. Although there is no
currently  a public  market for the  Company's  common  stock,  the Company is a
reporting company and does have a base of public shareholders.

      The Company does not propose to restrict its search for Potential Business
Opportunities to any particular  industry or any particular  geographic area and
may, therefore,  engage in essentially any business to the extent of its limited
resources.  It is anticipated that knowledge of Potential Business Opportunities
will be made known to the Company by various sources, including its officers and
directors,  professional advisors such as attorneys and accountants,  securities
broker-dealers,  venture capitalists,  members of the financial  community,  and
others who may present  unsolicited  proposals.  The Company may compensate such
parties for services rendered.

      There can be no  assurance  that the Company will ever acquire a Potential
Business  Opportunity.  Even  if the  Company  is able to  acquire  a  Potential
Business  Opportunity,  there can be no assurance that any such acquisition will
be profitable to the Company or its Stockholders.  Stockholders  should be aware
that an  investment  in the Company could result in a total loss of an investors
investment.

      The analysis of a Potential Business  Opportunity will be undertaken by or
under the supervision of the officers and directors of the Company.  Inasmuch as
the  Company  will have only  limited  funds  available  to it in its search for
Potential  Business  Opportunities,  the  Company  will  not be able  to  expend
significant funds on a complete and exhaustive investigation of such business or
opportunity.  The Company will,  however,  investigate,  to the extent  believed
reasonable by its management, such Potential Business Opportunities.

      Prior to making a  decision  to  acquire  or  participate  in a  Potential
Business  Opportunity,  the Company will obtain written materials  regarding the
Potential  Business  Opportunity  containing  such  items  as a  description  of
products,   services,  and  company  history;   management  resumes;   financial
information;  available projections with related assumptions upon which they are
based;  evidence of existing  patents,  trademarks,  or service  marks or rights
thereto; present any proposed forms of compensation to management; a description
of  transactions  between  the  prospective  entity  and its  affiliates  during
relevant  analysis of risks and competitive  conditions;  and other  information
deemed relevant.

      It is anticipated that the  investigation of specific  Potential  Business
Opportunities  and  the  negotiation,   drafting,   and  execution  of  relevant
agreements, disclosure documents, and other instruments will require substantial
management time and attention and substantial costs for accountants,  attorneys,
and others.  If a decision is made not to  participate  in a specific  Potential
Business   Opportunity,   the  costs   theretofore   incurred   in  the  related
investigation  would not be  recoverable.  Furthermore,  even if an agreement is
reached for the participation in a specific Potential

                                      4

<PAGE>



Business  Opportunity,  the failure to consummate that transaction may result in
the loss to the Company of the related costs incurred.

      The Company will have unrestricted flexibility in seeking,  analyzing, and
participating in Potential Business  Opportunities.  In its efforts, the Company
will consider the following kinds of factors:

(a)  Potential  for growth,  indicated  by new  technology,  anticipated  market
     expansion, or new products;

(b)  Competitive  position  as  compared  to  other  firms  engaged  in  similar
     activities;

(c)  Strength of management;

(d)  Capital  requirements and anticipated  availability of required funds to be
     provided  by the  Company  from  future  operations  through  the  sale  of
     additional  securities,  through joint ventures or similar  arrangements or
     from other sources;

(e)  Other relevant factors.

      Potential  Business  Opportunities may occur in many different  industries
and at  various  stages  of  development,  all of  which  will  make the task of
comparative  investigation and analysis of such business opportunities extremely
difficult  and  complex.  Potential  investors  must  recognize  that due to the
Company's limited capital  available for investigation and management's  limited
experience  in business  analysis  the Company  may not  discover or  adequately
evaluate adverse facts about the opportunity to be acquired.

      The Company is unable to predict when it may acquire a Potential  Business
Opportunity.  It expects,  however,  that the analysis of specific proposals and
the selection of a Potential  Business  Opportunity  may take several  months or
more.

      The  manner in which the  Company  participates  in a  Potential  Business
Opportunity will depend upon the nature of the opportunity, the respective needs
and  desires  of the  Company  and the  promoters  of the  opportunity,  and the
relative negotiating strength of the Company and such promoters.  The exact form
or structure of the Company's  participation in a Potential Business Opportunity
or venture will be dependent  upon the needs of the  particular  situation.  The
Company's  participation  may be structured as an asset  purchase  agreement,  a
lease,  a license,  a joint venture,  a partnership,  a merger or acquisition of
securities.  Generally,  issuance of the Company's  securities in an acquisition
would  be  undertaken  in  reliance  upon  one  or  more   exemptions  from  the
registration  provisions of applicable  federal  securities laws,  including the
exemptions  provided  for  non-public  or limited  offerings,  distributions  to
persons  resident in only one state,  and analogous  exemptions  provided  under
state securities laws. Shares issued in a reorganization  transaction based upon
these  exemptions  would  be  considered   "restricted"   securities  under  the
Securities Act of 1933 and Rule

                                      5

<PAGE>



144  promulgated  thereunder,  could not generally be resold for a period of two
years, and would be subject to certain other restrictions.  However, the Company
may agree in any such transaction to register  securities to be issued either at
the time of the transaction or at certain specified times thereafter.

      Some of the individual  lenders also had personally  guaranteed bank loans
of WRTI and CTR. As payment in full of the $394,950, the individual lenders were
paid a total of  $75,000  by the  Buyers  and were  issued a total of 26% equity
interest in a new limited liability company known as Continental Tire Recyclers,
LLC, a company  formed by the Buyers to own and operate CTR. In connection  with
such transaction, the bank released all parties from their personal guarantee of
the indebtedness of WRTI and CTR. Additionally, the individual lenders acquired,
either  directly from the Company or from other  shareholders a total of 620,809
shares of the Company's  common stock in connection with such  transaction  (See
"Certain Transactions.")

Letter of Intent

      The Company has entered in to a non-binding Letter of Intent to acquire by
merger, a small specialty chemical company.  The Letter of Intent sets forth the
basic terms of the  proposed  transaction  which  includes a condition  that the
Company  raise  additional  capital.  The Company's  management  has had several
meetings  with the  management  of the proposed  acquiree and has  discussed the
possibility of a private  securities  offering with a brokerage  firm. As of the
date hereof,  the Company has not entered into any binding agreement with either
the proposed  acquiree or the brokerage  firm and there can be no assurance that
the Company will complete the proposed merger.

      The current  terms of the proposed  merger,  as set forth in the Letter of
Intent,  require the Company to effect a 1-for-10  reverse  stock  split,  raise
additional capital in the amount of $3,750,000, change its name and domicile and
replace management.

      The Company's current shareholders will likely be diluted significantly in
their  percentage  ownership of the Company if the proposed merger is completed.
Even if the  proposed  merger  is agreed  upon by the  parties  in a  definitive
agreement,  their can be no assurance  that the merger will be completed.  It is
anticipated that the merger, if it completed, will take several months.

Employees

      The Company currently has no employees.

ITEM 2.  PROPERTIES

      The Company currently operates out of the office of Douglas P. Morris, the
Secretary and a director of the Company. The Company does not pay for the use of
these facilities.

                                      6

<PAGE>



ITEM 3.     LEGAL PROCEEDINGS

      There are not presently any material  pending legal  proceedings  to which
the  Company  is a  party  or of  which  any of  its  property  or  wholly-owned
subsidiary  is subject  and no such  proceedings  are known to the Company to be
threatened or contemplated against it.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      No  meetings  of the  Company's  shareholders  were held  during  the last
quarter of the Company's fiscal year.

                                    PART II

ITEM 5.     MARKET FOR THE REGISTRANT'S COMMON STOCK AND WARRANTS
AND RELATED SECURITY HOLDER MATTERS

      A.  Market  for Common  Stock.  There is no active  public  market for the
Company's  securities.  From  time-to-time,  the Company's common stock has been
traded, on a very limited basis, in the over-the-counter market.

      B. Holders.  The number of record holders of the Company's common stock as
of March 30, 1998  approximately  170. One of the  Company's  shareholders  is a
brokerage firm which owns securities as a nominee for its customers.

      C. Dividends. The Company has not paid any cash dividends to date and does
not anticipate or contemplate paying dividends in the foreseeable  future. It is
the present  intention  of  management  to utilize all  available  funds for the
development of the Company's business.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

General

      The  Company  is  currently  an  inactive   company  seeking  to  commence
operations by acquiring another company which is conducting  operations.  During
the year ended  December  31, 1997,  the Company  conducted  no  operations  and
generated no revenues. Prior to December 29, 1995, the Company had been involved
in the  business  of  recycling  used  tires and  designing,  manufacturing  and
marketing  shredding  equipment.  The  Company's  tire  recycling  and shredding
equipment  operations were  unsuccessful and the Company  generated  significant
losses during 1994 and 1995.  During 1995 the Company funded its operations with
loans from a commercial  bank,  from management and from other  individuals.  By
November  1995,  the Board of Directors had  concluded  that the Company did not
have the  capital,  or the ability to obtain  capital  necessary to continue its
current  operations.  The Company's Board of Directors initiated efforts to sell
the

                                      7

<PAGE>



Company's WRTI and CTR  operations.  The Company was able to interest one of its
directors and several other individuals in purchasing WRTI and CTR.

      Effective  December 29,  1995,  the Company sold all of its shares of WRTI
and CTR for $30,000.  As a result of such sale, the Company's total liabilities,
on a consolidated basis, decreased from $1,758,308 to approximately $6,500.

      The Company  currently has no active  business  operations  and is seeking
investments  in  other  business  entities  made  through  the  issuance  of the
Company's  securities.  The  Company has entered  into a  non-binding  Letter of
Intent  to  acquire  a  specialty  chemical  company.   However,   the  proposed
transaction  is  subject  to  numerous  conditions,  including  the  raising  of
significant  capital by the Company,  and  therefore,  there can be no assurance
that the Company will ever complete such merger.

      As a result of the  matters  described  above,  the  Company's  historical
financial  statements  and this  Management's  Discussion  and  Analysis are not
necessarily   reflective  of  the  Company's  future   operations  or  financial
condition.

 Financial Condition

       Total assets at December 31,1997 were $7,273,  all of which was cash. The
Company's  only assets since the sale of CTR and WRTI has been a limited  amount
of cash. On December 31,1997, the Company had liabilities of $8,000. The Company
intends to use such cash to pay for various  filing fees and  professional  fees
relating to its reporting obligations and to fund the costs which may arise from
seeking new business opportunities.

      It is likely that the Company will be required to raise additional capital
in order to  attract  and  potential  acquisition  partner  but  there can be no
assurance that the Company will be able to raise any additional  capital.  It is
also likely that any future  acquisition  will be made  through the  issuance of
shares of the  Company's  common  stock which will result in the dilution of the
percentage ownership of the current shareholders.

      The proposed merger  transaction is conditioned  upon, among other things,
the completion of a private offering of the Company's  securities to raise gross
offering  proceeds  of  approximately  $3,750,000.  The  Company  has  commenced
discussions  with a broker relating to the sale of securities but as of the date
of this 10-KSB,  no agreement has been entered into with such broker or with any
other broker.

      The  auditors'  report  on  the  Company's  December  31,  1997  financial
statements  contains a going  concern  qualification,  which  provides  that the
Company's  ability to continue as a going  concern is dependent  upon it raising
additional  capital.  The Company will continue to be an inactive company unless
and until it raises additional capital and acquires an operating company.  There
can be no assurance that either will occur.

                                      8

<PAGE>



Results of Operations

      During 1997 and 1996, the Company conducted no operations and generated no
revenues.  All of the Company's  revenues for the years ended  December 31, 1995
and 1994 were derived from the operations of WRTI and CTR. As stated above,  the
Company  sold  WRTI  and  CTR on  December  29,1995  and  has  treated  them  as
discontinued  operations.  Therefore,  the  revenues  of WRTI and CTR have  been
excluded  from the  Statement of  Operations  which is included in the financial
statements attached hereto. Therefore, excluding the operations of WRTI and CTR,
the Company had no revenues during 1997,  1996, 1995 or 1994. If the revenues of
WRTI and CTR were included in the Statement of  Operations,  total  consolidated
revenues would have been $1,093,283 during 1995 and $305,387 during 1994.

     The Company's total loss for 1997 was $13,465 compared to a loss of $10,597
during 1996.

      It is unlikely  that the Company  will be able to  generate  any  revenues
unless and until it  acquires  an  operating  company,  of which there can be no
assurance.

Plan of Operation

      Commencing in the fourth  quarter of 1995, the Company's Plan of Operation
was essentially the plan to sell its WRTI and CTR operation.  Effective December
29, 1995 these operations were sold. The Company's  current plan of operation is
to acquire another operating  company.  (See "Item 1 - Description of Business -
Current Business Plan.")

      It is likely that any acquisition will be a "reverse  merger"  acquisition
whereby the Company acquires a larger company by issuing shares of the Company's
common stock to the  shareholders  of the larger  company.  Although the Company
would be the surviving or parent  company from a corporate law  standpoint,  the
shareholders of the larger company would be the controlling  shareholders of the
Company  and the  larger  company  would be treated  as the  survivor  or parent
company from an  accounting  point of view.  It can be expected that any company
which  may  desire  to be  acquired  by the  Company  will  do so as  method  of
potentially  becoming a public company more quickly and less expensively than if
such company undertook its own public offering.

      The Company has entered in to a non-binding Letter of Intent to acquire by
merger, a small specialty chemical company.  The Letter of Intent sets forth the
basic terms of the  proposed  transaction  which  includes a condition  that the
Company  raise  additional  capital.  The Company's  management  has had several
meetings  with the  management  of the proposed  acquiree and has  discussed the
possibility of a private  securities  offering with a brokerage  firm. As of the
date hereof,  the Company has not entered into any binding agreement with either
the proposed  acquiree or the brokerage  firm and there can be no assurance that
the Company  will  complete  the  proposed  merger.  If the  proposed  merger is
completed,  the Company will likely change its, name,  domicile,  management and
capital  structure.  The Company's  current  shareholders will likely be diluted
significantly  in their  percentage  ownership  of the  Company if the  proposed
merger is completed.

                                      9

<PAGE>



Even if the  proposed  merger  is agreed  upon by the  parties  in a  definitive
agreement,  their can be no assurance  that the merger will be completed.  It is
anticipated that the merger, if it completed, will take several months.

      Even if the  Company  is  able  to  acquire  another  company  such as the
chemical  company,  there can be no assurance that the Company will ever operate
at a profit.


ITEM 7.      FINANCIAL STATEMENTS

                         Index to Financial Statements
Financial Statements
      Independent Accountants' Report
        Year Ended December 31,1997

      Balance Sheet
        December 31,1997

      Statement of Operations
        Years ended December 31,1997 and 1996

      Statement of Changes in Stockholders'  Equity From January 1, 1996 through
        December 31,1997

      Statement of Cash Flows -
        Years ended December 31,1997 and 1996

      Notes to Financial Statements

Financial  Statement  Schedules All  schedules are omitted  because they are not
applicable or the required  information is shown in the financial  statements or
notes thereto.

                                      10

<PAGE>



                                INDEPENDENT AUDITORS' REPORT



To the Board of Directors and
Stockholders of Emerald Capital Investments, Inc.

We have audited the accompanying  balance sheet of Emerald Capital  Investments,
Inc.,  (a  development  stage  company) as of December  31, 1997 and the related
statements of operations, stockholders' equity (deficit), and cash flows for the
years ended December 31, 1997 and 1996 and the cumulative amounts since December
29, 1995 (commencement of development stage). These financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial  position of Emerald Capital  Investments,
Inc. (a  development  stage company) as of December 31, 1997, and the results of
its operations and its cash flows for the years ended December 31, 1997 and 1996
and the cumulative  amounts since December 29, 1995 (commencement of development
stage), in conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial  statements,  the Company  has  suffered  recurring  losses that raise
substantial doubt about its ability to continue as a going concern. Management's
plans  regarding  those  matters  also are  described  in Note 2. The  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.


                                        TANNER + COMPANY

Salt  Lake  City,  Utah
February  10,  1998,  except  for Note 7 
which is dated February 25, 1998

                                                          11

<PAGE>


                                       EMERALD CAPITAL INVESTMENTS, INC.
                                           (A Development Stage Company)

                                                           Balance Sheet

                                                       December 31, 1997
------------------------------------------------------------------------------






         Assets

Current assets -
   cash                                                     $      7,273
                                                            ------------

            Total assets                                    $      7,273
                                                            ============

------------------------------------------------------------------------

                                                            
         Liabilities and Stockholders' Deficit

Current liabilities - accounts payable                      $      8,000
                                                            ------------

Commitments                                                            -

Stockholders' equity:
   Common stock - $.001 par value. 100,000,000 shares
     authorized; 5,808,698 shares issued and outstanding           5,809
   Additional paid-in capital                                  2,600,656
   Accumulated deficit                                        (2,607,192)
                                                             ------------

            Total stockholders' deficit                             (727)
                                                             ------------

            Total liabilities and stockholders' deficit     $      7,273
                                                            =============






------------------------------------------------------------------------------
See accompanying notes to financial statements.                          12

<PAGE>


                                       EMERALD CAPITAL INVESTMENTS, INC.
                                           (A Development Stage Company)

                                                 Statement of Operations

                         Years Ended December 31, and Cumulative Amounts
------------------------------------------------------------------------------






                                                             Cumulative
                                        1997        1996      Amounts
                                    ------------------------------------

Revenue                             $     -     $      -    $      -           -

Selling, general and administrative 
  expenses                             13,465      10,597      24,062
                                    ------------------------------------

    Loss from continuing operations   (13,465)    (10,597)    (24,062)
                                    ------------------------------------

Loss before income taxes              (13,465)    (10,597)    (24,062)
Income tax expense                         -           -           -
                                    ------------------------------------

         Net loss                   $ (13,465)   $(10,597)   $(24,062)
                                    ====================================

         Net loss per share         $     (.00)  $   (.00)   $   (.00)  
                                    ====================================





------------------------------------------------------------------------------
See accompanying notes to financial statements.                          13

<PAGE>


                                       EMERALD CAPITAL INVESTMENTS, INC.
                                           (A Development Stage Company)

                             Statement of Stockholders' Equity (Deficit)

                                  Years Ended December 31, 1997 and 1996
------------------------------------------------------------------------------












                                               
                           Common Stock       Additional 
                        -------------------   Paid-In    Accumulated
                           Shares     Amount    Capital      Deficit    Total
                        -------------------------------------------------------
Balance, 
  January 1, 1995       5,808,698    $5,809  $2,600,656  $(2,583,130)  $23,335

Net loss                     -          -        -         (10,597)    (10,597)
                        -------------------------------------------------------

Balance, 
   December 31, 1996    5,808,698   5,809     2,600,656  (2,593,727)    12,738

Net loss                     -        -          -         (13,465)    (13,465)
                        -------------------------------------------------------

Balance, 
   December 31, 1997    5,808,698  $5,809    $2,600,656  $(2,607,192)  $ (727)
                        =======================================================




------------------------------------------------------------------------------
See accompanying notes to financial statements.                         14

<PAGE>


                                       EMERALD CAPITAL INVESTMENTS, INC.
                                           (A Development Stage Company)

                             Statement of Cash Flows

                         Years Ended December 31, and Cumulative Amounts
------------------------------------------------------------------------------








                                                                  Cumulative
                                              1997        1996      Amounts
                                         --------------------------------------
Cash flows from operating activities:
 Net loss                                $  (13,465)  $ (10,597) $   (24,062)
 Adjustment to reconcile net loss to
  net cash used in operating activities:
    Decrease in accounts receivable              -       30,000       30,000
    Increase (decrease) in accounts            8,000     (6,665)       1,335
payable
                                             ----------------------------------

            Net cash (used in) provided by
            operating activities              (5,465)    12,738        7,273
                                             ----------------------------------

Cash flows from investing activities             -           -          -
                                             ----------------------------------

Cash flows from financing activities             -           -          -
                                             ----------------------------------

            Net increase in cash              (5,465)     12,738      7,273

Cash, beginning of period                     12,738         -          -
                                             ----------------------------------

Cash, end of period                       $    7,273   $  12,738   $  7,273
                                          =====================================




------------------------------------------------------------------------------
See accompanying notes to financial statements.                          15

<PAGE>


                                       EMERALD CAPITAL INVESTMENTS, INC.
                                           (A Development Stage Company)

                             Statement of Cash Flows
                                                               Continued

------------------------------------------------------------------------------





Supplemental disclosures of cash flow information:


                                          Years Ended
                                            December         Cumulative
                                    ------------------------
                                        1997        1996      Amounts
                                    ------------------------------------

Cash paid during the year for:

      Interest                      $      -    $      -    $      -  
                                    ===================================

      Income taxes                  $      -    $      -    $      -   
                                    ===================================





------------------------------------------------------------------------------

See accompanying notes to financial statements.                            16

<PAGE>


                                       EMERALD CAPITAL INVESTMENTS, INC.
                                           (A Development Stage Company)

                                           Notes to Financial Statements

                           December 31, 1997 and 1996
------------------------------------------------------------------------------


1. Organization and Summary of Significant Accounting Policies.

Organization
Emerald Capital Investments,  Inc. (the Company) was organized under the laws of
the state of  Delaware  on March 22,  1989.  On January  10,  1994,  the Company
entered into an agreement  whereby the Company  issued  1,862,427  shares of its
common  stock for all of the issued and  outstanding  shares of Waste  Reduction
Technologies,  Inc.,  (WRTI) and its wholly owned  subsidiary  Continental  Tire
Recycles, Inc. (CTR).


Effective  December  29, 1995 the  Company  sold its common  stock of WRTI.  The
Company  ultimately  received  $30,000 cash from the sale of the WRTI stock. The
purchaser  was a company in which a  shareholder  and former  officer of Emerald
Capital Investments, Inc., is a part owner.


Effective  with the sale of WRTI on December  29,  1995,  the  Company  became a
development stage company. The Company is considered a development stage Company
as defined in SFAS No. 7. The Company  has, at the present,  time,  not paid any
dividends and any dividends  that may be paid in the future will depend upon the
financial requirements of the Company and other relevant factors.


Loss Per Common Share
Loss per share of  common  stock is  calculated  based on the  weighted  average
number of shares  outstanding  during each year and the period December 31, 1995
through December 31, 1997. Stock options were not included in the calculation of
loss per share as the effect would be
antidilutive.


Cash and Cash Equivalents
For purposes of the  statement of cash flows,  the Company  considers all highly
liquid debt instruments  purchased with a maturity of three months or less to be
cash equivalents.


------------------------------------------------------------------------------
                                                                      17

<PAGE>


                                       EMERALD CAPITAL INVESTMENTS, INC.
                                           (A Development Stage Company)
                                           Notes to Financial Statements
                                                               Continued

------------------------------------------------------------------------------



1. Organization and Summary of Significant Accounting Policies (Continued)

Use of Estimates
The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.


2. Going Concern
The accompanying financial statements of Emerald Capital Investments, Inc., have
been prepared on a going-concern basis, which contemplates profitable operations
and the satisfaction of liabilities in the normal course of business.  There are
uncertainties  that raise  substantial doubt about the ability of the Company to
continue  as a going  concern.  As shown in the  statement  of  operations,  the
Company  reported losses for the years ended December 31, 1997 and 1996, and has
an accumulated deficit.


The Company's  continuation  as a going concern is dependent upon its ability to
develop  sufficient  cash  flows for  operations  to meet its  obligations.  The
financial  statements do not include any adjustments  that might result from the
outcome of these uncertainties.


3. Income Taxes
The income  taxes  computed  at  statutory  rates  differ from the amount in the
financial statement as follows:


                                          Years Ended
                                          December 31,    
                                      ------------------- Cumulative
                                         1997     1996     Amounts
                                      -----------------------------

Benefit for income taxes
  at statutory rates                   $  1,000  $ 2,000  $ 3,000
Change in valuation allowance            (1,000)  (2,000)  (3,000)
                                      -----------------------------

                                       $     -   $    -   $    -
                                      =============================



------------------------------------------------------------------------------
                                                                      18

<PAGE>


                                       EMERALD CAPITAL INVESTMENTS, INC.
                                           (A Development Stage Company)
                                           Notes to Financial Statements
                                                               Continued

------------------------------------------------------------------------------



3. Income Taxes (Continued)
The Company has a deferred tax asset,  which  consists of the net operating loss
carryforwards  of  approximately   $884,000.  A  valuation  allowance  has  been
established  for  the  total  amount  of  the  deferred  tax  asset,  due to the
uncertainty of realization.

As of December 31, 1997,  the Company had a net operating loss  carryforward  of
approximately  $2,599,000  available  to offset  future  income  for  income tax
reporting  purposes.  This amount  begins to expire in 2004.  The ability of the
Company to utilize  the net  operating  loss is  dependent  upon the tax laws in
effect at the time such loss  carryforwards can be utilized.  The Tax Report Act
of 1986  significantly  limits the annual  amount  that can be utilized of these
carryforwards as a result of a change in ownership.


4. Stock Options Options
As of December 31, 1997 and 1996, the Company had 1,530,900 options  outstanding
to purchase shares of the Company's common stock. The options are exercisable at
amounts between $.25 and $1.00 anytime prior to the expiration date. The options
expire beginning at various dates through December 31, 2002.


5. Earnings Per Share
In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards No. 128 (SFAS 128)  "Earnings Per Share," which
requires  companies  to  present  basic  earnings  per share  (EPS) and  diluted
earnings per share,  instead of the primary and fully  diluted EPS as previously
required. The new standard also requires additional  informational  disclosures,
and makes certain  modifications  to the previously  applicable EPS calculations
defined in Accounting  Principles  Board No. 15. The new standard is required to
be adopted by all public  companies for reporting  periods ending after December
15, 1997, and requires restatement of EPS for all prior periods reported. During
the year ended December 31, 1997, the Company adopted this standard.



------------------------------------------------------------------------------
                                                                      19

<PAGE>


                                       EMERALD CAPITAL INVESTMENTS, INC.
                                           (A Development Stage Company)
                                           Notes to Financial Statements
                                                               Continued

------------------------------------------------------------------------------


5. Earnings Per Share (Continued)

Earnings per share information in accordance with SFAS 128 is as follows:

                       Year Ended December 31, 1997
                 ----------------------------------------
                     Loss          Shares      Per-Share
                  (Numerator)  (Denominator)    Amount
                 ------------- -------------- -----------
Net Loss         $    (13,465)
Less preferred
 stock dividents       -
                 -------------
Basic EPS
Loss available
 to common
 stockholders         (13,465)    5,809,000    $  (.00)
                                              ===========
Effect of
 Dilutive
 Securities
Stock options           -             -
                 ------------- --------------
Diluted EPS
Loss available to
 common
 stockholders
 plus
 assumed
 converstions    $     (13,465)   5,809,000    $   (.00)
                 ========================================



<PAGE>


                                       EMERALD CAPITAL INVESTMENTS, INC.
                                           (A Development Stage Company)
                                           Notes to Financial Statements
                                                               Continued

------------------------------------------------------------------------------

5. Earnings Per Share (Continued)


                       Year Ended December 31, 1997
                 ----------------------------------------
                     Loss          Shares      Per-Share
                  (Numerator)  (Denominator)    Amount
                 ------------- -------------- -----------
Net Loss         $  (10,597)

Less preferred
 stock dividents       -
                 -------------
Basic EPS
Loss available
 to common
 stockholders        (10,597)    5,809,000    $   (.00)
                                              ===========
Effect of
 Dilutive
 Securities
Stock options           -             -
                 ------------- --------------
Diluted EPS
Loss available to
 common
 stockholders
 plus
 assumed
 converstions    $   (10,597)    5,809,000      $  (.00)
                 ========================================



<PAGE>


                                       EMERALD CAPITAL INVESTMENTS, INC.
                                           (A Development Stage Company)
                                           Notes to Financial Statements
                                                               Continued

------------------------------------------------------------------------------

5. Earnings Per Share (Continued)


                       Year Ended December 31, 1997
                 ----------------------------------------
                     Loss          Shares      Per-Share
                  (Numerator)  (Denominator)    Amount
                 ------------- -------------- -----------
Net Loss         $ (16,062)
Less preferred
 stock dividents       -
                 -------------
Basic EPS

Loss available
 to common
 stockholders       (16,062)     5,809,000      $  (.00)
                                              ===========
Effect of
 Dilutive
 Securities
Stock options           -            -
                 ------------- --------------
Diluted EPS
Loss available to
 common
 stockholders
 plus
 assumed
 converstions    $  (16,062)      5,809,000     $  (.00)
                 ========================================


<PAGE>


                                       EMERALD CAPITAL INVESTMENTS, INC.
                                           (A Development Stage Company)
                                           Notes to Financial Statements
                                                               Continued

------------------------------------------------------------------------------



6. Stock Based Compensation
The  Financial  Accounting  Standards  Board has issued  Statement  of financial
Accounting  Standards No. 123,  "Accounting for Stock-Based  Compensation" (SFAS
123)  which  established   financial  accounting  and  reporting  standards  for
stock-based  compensation.  The new  standard  defines  a fair  value  method of
accounting  for an employee  stock  option or similar  equity  instrument.  This
statement  gives entities the choice  between  adopting the fair value method or
continuing to use the intrinsic value method under  Accounting  Principles Board
(APB) Opinion No. 25 with footnote  disclosures  of the pro forma effects if the
fair value method had been  adopted.  The  Corporation  has opted for the latter
approach. Accordingly, no compensation expense has been recognized for the stock
option plans.


No options have been granted since SFAS 123 was issued,  therefore,  the pricing
model assumptions are not applicable.


The following table summarizes  information  about stock options  outstanding at
December 31, 1997:


                       Options Outstanding             Options Exercisable
-------------------------------------------------------------------------------
                            Weighted
                            Average      
               Number       Remaining     Weighted    Number         Weighted
Range of       Outstanding  Contractual   Average     Exercisable    Average
Exercise       at           Life          Exercise    at             Exercise
Prices         12/31/97     (Years)       Price       12/31/97       Price
-------------------------------------------------------------------------------

$.25           1,100,000        5.0       $  .25      1,100,000     $   .25
 .75 to 1.00     430,900        1.7          .84        430,900         .84
_______________________________________________________________________________

$.25 to 1.00   1,530,900        4.0       $  .42       1,530,900    $   .42
===============================================================================


7. Subsequent Event.
On February 25, 1998, the Company entered into a letter of intent  agreement for
a  potential  acquisition  transaction  between  the  Company  and an  unrelated
company.  The agreement  would require a 1 for 10 reverse split of issued shares
and options, a private placement of approximately  1,500,000 shares, post split,
at $2.50 per share and an exchange with the target company,  which would cause a
change in control of the Company.




------------------------------------------------------------------------------
                                                                      23

<PAGE>




ITEM 8.      DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

   None.

                                PART III

ITEM 9.      DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

     A.  Identification  of Directors.  Background  information  concerning  the
Company's officers and directors is as follows:

Name                       Age             Position
Frank H. Ross, III         52              CEO/President/
                                           Treasurer /Director

Douglas P. Morris          42              Vice President/Secretary/Director

Henry Obartuch, II         49              Director

     Frank H. Ross, III. Mr. Ross is a founder of WRTI.  Since 1973, he has been
the  president  of  Ross-Payne  &  Associates,   a  business   consulting   firm
specializing  in the management of construction  and heavy equipment  companies.
Mr. Ross has been an officer and director of the Company since March 5, 1994.

     Douglas P. Morris. Mr. Morris, is and has been since 1988, the owner of H &
M Capital  Investments,  Inc. a privately-held  business  consulting firm. H & M
Capital  Investments,  Inc. is engaged in  consulting  with  privately-held  and
publicly-held  companies  relating  to  management,  debt  financing  and equity
financing.  Mr. Morris is the president of Celtic  Investment,  Inc., a publicly
held company engaged in the financial  services  business.  Mr. Morris is also a
director and officer of Millennium  Electronics,  Inc. and a director of Dauphin
Technology,  Inc. From 1984, to 1988, Mr. Morris was  self-employed  in managing
his  own  investments.   Mr.  Morris  received  his  Masters  Degree  in  Public
Administration  at the  University  of  Southern  California  in  1982,  and his
Bachelor of Arts Degree in Judicial Administration from Brigham Young University
in 1978.

     Henry Obartuch, II. Mr. Obartuch was appointed a director of the Company in
January  1996.  Mr.  O'bartuch  owns and  operates a funeral  home  business  in
Chicago, Illinois.

   B.             Significant Employees.  None

   C.             Family Relationships.  None

                                                                      24

<PAGE>



   D. Compliance with Section 16(a). The Company is not subject to Section 16 of
the Exchange Act.

ITEM 10.    EXECUTIVE COMPENSATION

   The following table sets forth the aggregate compensation paid by the Company
for services  rendered  during the last three  calendar  years to the  Company's
Chief Executive Officer and other executive officers.


<TABLE>
<CAPTION>
                                                        Long Term Compensation
                                                        ----------------------
                            Annual Compensation              Awards        Payouts
                        ------------------------------------------------------------------
Name                                           Other                        
and                                            Annual   Restricted                     All Other
Principal                                      Compen-  Stock       Options/  LTIP     Compen-
Position              Year  Salary     Bonus   sation   Award(s)    SARs      Payouts  sation
-----------------------------------------------------------------------------------------------
<S>                   <C>   <C>        <C>      <C>      <C>         <C>       <C>      <C>

Frank Ross, III(1)    1997    -0-      -0-      -0-      -0-         -0-       -0-      -0-
CEO/ President        1996    -0-      -0-      -0-      -0-         -0-       -0-      -0-
                      1995  $34,616    -0-      -0-      -0-         -0-       -0-      -0-
</TABLE>



      (1) Mr. Ross was appointed a director and Chief  Financial  Officer of the
      Company in March 1994.  In January  1995,  Mr. Ross was  appointed CEO and
      President of the Company.  Pursuant to his Employment Agreement.  Mr. Ross
      earned  a  monthly  salary  of  $10,000.  However,  due to  the  financial
      condition of the  Company,  Mr. Ross was only paid $34,616 in total salary
      during the year ended December  31,1995.  The liability for the balance of
      the salary was  eliminated  in the  transaction  wherein WRTI and CTR were
      sold by the Company. In March 1994, the Company granted Mr. Ross an Option
      to  purchase  833,333  shares of the  Company's  common  stock at $.05 per
      share.  Such  option  was  subject  to  certain  conditions  and  was  not
      exercisable  in 1994.  In 1995,  such option was canceled  pursuant to the
      agreement  of the Company and Mr. Ross.  During 1994,  Mr. Ross was issued
      options to purchase 67,500 shares of the Company's common stock at a $1.00
      per share for loans and  guarantees and not as  compensation  for services
      rendered.  During  1995,  Mr. Ross was assigned  416,081  shares of common
      stock from  former  officers  and was  granted  options by the  Company to
      purchase  478,176 shares of the Company's  common stock at $.75 per share.
      Such shares and options were not issued for services  rendered but related
      to financing matters. Effective January 9, 1998, all of the options of Mr.
      Ross were canceled and he was issued  incentive  stock options to purchase
      500,000  shares of the  Company's  common  stock at $.25 per  share.  Such
      options expire 12/31/2002.

     Douglas P. Morris.  Mr.  Morris was president of the Company until March 5,
1994.  He is currently a director and the vice  president  and  secretary of the
Company.  Mr. Morris was paid $8,000 as cash  compensation by the Company during
1995.  In March  1994,  the  Company  granted  Mr.  Morris an option to purchase
350,000 shares of the Company's common stock at $.05 per share.  Such option was
subject to certain  conditions and was not  exercisable  in 1994. In 1995,  such
option was canceled  pursuant to the  agreement  of the Company and Mr.  Morris.
During 1994.  Mr.  Morris was issued  options to purchase  67,500  shares of the
Company's  common  stock at $1.00  per  share in  consideration  for  loans  and
guarantees and not as compensation  for services  rendered.  In 1995, Mr. Morris
was  assigned  159,593  shares of the  Company's  common  stock  from two former
officers and was granted  options by the Company to purchase  202,500  shares of
common stock in connection with

                                                                      25

<PAGE>



financing matters and not for services rendered.  Effective January 9, 1998, all
of the options of Mr.  Morris were  canceled and he was issued  incentive  stock
options to purchase  350,000  shares of the  Company's  common stock at $.25 per
share. Such options expire 12/31/2002.

      Mr.  Morris is the owner of H & M  Capital.  On  January  9,  1998,  H & M
Capital  Investment was issued 400,000 shares of the Company's  common stock for
services  rendered.  Such  shares  were  valued  at $.01 per share or a total of
$4,000.

     Henry Obartuch. Mr. Obartuch is a director if the Company. Prior to January
9, 1998, he had been issued options to purchase  249,667 shares of the Company's
common stock.  Effective  January 9, 1998, all of the options of Mr. o' bartcuch
were  canceled and he was issued  incentive  stock  options to purchase  350,000
shares of the  Company's  common stock at $.25 per share.  Such  options  expire
12/31/2002.

Stock Options Granted in the Last Fiscal Year

      No stock  options were granted to management  during 1997 or 1996.  During
1995, the Company granted Douglas P. Morris an option to purchase 202,500 shares
of the  Company's  common  stock and Frank H.  Ross,  III an option to  purchase
478,176 shares of the Company's common stock in consideration  for loans made to
the  Company  by these  individuals  and for their  guarantee  of  certain  bank
financing.  These options were not issued for services rendered. Certain options
were  granted  in  1998  (see  Item  12  "Certain   Relationships   and  Related
Transactions".)  Effective January 9, 1998 all of these options were canceled at
new  incentive  stock options were issued to the  Company's  current  management
which are described above.

Aggregate Option Exercises and Number/Value of Unexercised Options

      All  options  of  management  outstanding  as of  December  31,  1997 were
canceled  and new  options  were  issued as of January 9,  1998.  The  Company's
management owns the following options:

      Name              Option Shares     Exercise Price    Expiration Date

      Frank Ross             500,000           $.25         12/31/2002
      Douglas P. Morris      350,000           $.25         12/31/2002
      Henry Obartcuch        250,000           $.25         12/31/2002

      All of such options carry certain registration rights.

      These  options  are  currently  exercisable  but  have not  current  value
inasmuch as there is no trading in the  Company's  common  stock and the Company
has a negative net worth.


                                                                      26

<PAGE>



Compensation of Directors

      The Company's  non-employee  directors are not paid for Board of Directors
Meeting attended.

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

      A. Security  Ownership of Certain  Beneficial  Owners. The following table
sets  forth   information   regarding  shares  of  the  Company's  common  stock
beneficially owned as of March 30, 1998 by: (1) each officer and director of the
Company; (ii) all officers and directors as a group; and (iii) each person known
by the Company to beneficially  own 5 percent or more of the outstanding  shares
of the Company's common stock.

      Name and Address of         Amount and Nature of         Percent of
      Beneficial Owner            Beneficial Ownership(1)      Class Ownership

   Douglas P. Morris(2)                      1,026,259            13%
   330 East Main Street
   Second Floor
   Barrington, Illinois 60010-3218

   Frank H. Ross, III(3)                     1,481,293            19%
   536 Eton Drive
   Barrington, IL 60010

   Henry Obartuch (4)                          499,667             7%
   150 South Dundee Road
   East Dundee, IL 60118

   Northcliffe Consulting LLC                  400,000             5%
   960 Northcliffe Drive
   Salt Lake City, UT 84103

   All Officers and
   Directors as a
   Group (3 persons)                         3,007,219            39%

      (1) There were  6,608,698  shares issued and  outstanding  as of March 30,
      1998. For purposes of disclosure of shares outstanding and shares owned by
      persons listed above,  all shares issuable within 60 days are deemed to be
      issued and outstanding pursuant to rules and regulations of the Securities
      and  Exchange  Commission.  Currently,  the  above-referenced  persons own
      options to purchase  1,100,000  shares  which are  currently  exercisable.
      Therefore,  for the sole purpose of the above set forth  chart,  there are
      deemed to be 7,708,698 shares issued and outstanding.

      (2) A total of 676,259 of these  shares are shares  owned of record by Mr.
      Morris or his  affiliates.  The  remaining  350,000  shares  listed as own
      relate to currently exercisable options to purchase 350,000 shares.


                                                                      27

<PAGE>



      (3) A total of 981,293 of these  shares are shares  owned of record by Mr.
      Ross.  The  remaining  500,00  shares  listed  above  relate to  currently
      exercisable options to purchase 500,000 shares.

      (4) A total of 249,667 of these  shares are shares  owned of record by Mr.
      Obartuch.  The remaining  250,000  shares listed above relate to currently
      exercisable options to purchase 250,000 shares.


      B. Security Ownership of Management. See Item 11(a) above.

      C.  Changes  in  Control.  Except  for  the  proposed  merger  transaction
described  in  Item  1  above,   no  changes  in  control  of  the  Company  are
contemplated. If an acquisition is effected, of which there can be no assurance,
the  Company  would  likely  issue  such  number of shares to the  owners of the
acquired company which would give them control of the Company.

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      On January 9, 1998,  the Company issued 400,000 shares of its common stock
to H & M. Capital valued at $4,000 for services rendered. H & M Capital is owned
by Douglas P. Morris an officer and director of the Company.

     On January 9, 1998,  the Company  issued 400,000 shares of its common stock
to  Northcliffe  Consulting,   LLC  valued  at  $4,000  for  services  rendered.
Northcliffe Consulting,  LLC is owned by A. O. Headman, Jr., an attorney for the
Company.

Sale of WRTI and CTR

      In December  1995,  the  Company  completed a  recapitalization  plan.  In
connection with the plan, the Company sold its shares of WRTI and CTR to a group
of Buyers,  one of which was William Holmes,  who, at the time of such sale, was
an officer and director of the Company.  (See "Item 1.") In connection with this
transaction  and the  forgiveness  of certain debt owed to secured  creditors of
WRTI and CTR, Mr. Holmes  transferred all 620,809 of his shares of the Company's
common stock to the following secured creditors of the Company:

            Frank H. Ross, III             259,281
            Douglas P. Morris               78,593
            Bruce Johnson                   78,593
            Bill Pragalz                    78,593
            James Blackburn                 78,593
            Kirk Ferguson                   47,156

      The plan also included the  assignment of 350,000  shares of the Company's
common stock owned by Thomas F. Katsoulis, a former officer and director, to the
above referenced  persons as additional  consideration  of their  forgiveness of
debt owed by the Company. Such shares were assigned to the following persons:

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            Frank H. Ross, III             156,800
            Douglas P. Morris               81,000
            Bruce Johnson                   81,000
            Bill Pragalz                    12,000
            James Blackburn                 12,000
            Kirk Ferguson                    7,200

      In 1995,  the Company  issued  approximately  308,000  shares of stock for
services  which  had  been  rendered  in 1994 in  connection  with  the  initial
acquisition of WRTI by the Company and with a private placement of the Company's
securities.  A total of 250,257 of such shares were issued to ACAP Financial for
fees in the Company's 1994 private  placement.  A total of 58,584 of such shares
were issued to James  Blackburn for finders fees related to the  acquisition  of
WRTI in 1994.  These  shares were  authorized  for issuance in 1994 but were not
actually issued until 1995.

                                 PART IV

ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K

      A.    Exhibits.

            3.1  Certificate of  Incorporation  -  incorporated  by reference to
            Exhibit  3.1 to  Registration  Statement  on Form S-18 (SEC File No.
            33-30365-C)

            3.2  Bylaws  -   incorporated   by   reference  to  Exhibit  3.2  to
            Registration Statement on Form S-18 (SEC File No. 33-30365-C).

            10.1  Agreement  and  Plan  of   Reorganization  -  incorporated  by
            reference to Form 8-K filed March 7, 1994.  This Agreement  pertains
            to the Registrant's acquisition of Waste Reduction Technology, Inc.

            10.2 Stock Acquisition Agreement.  Attached.

      B.    The Company  filed no Form 8-K's during the quarter  ended  December
            31,1997.

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                               SIGNATURES


      In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                    EMERALD CAPITAL INVESTMENTS, INC.



Date: April 1, 1998                 By:   /s/ Frank H. Ross, III
                                          Frank H. Ross, III
                                          Principal Executive
                                          Principal Financial Officer

      In  accordance  with the Exchange  Act, this Report has been signed by the
following  persons on behalf of the  Registrant and in the capacities and on the
dates indicated:

Signature                     Capacity                      Date


/s/ Frank H. Ross, III        President/ CEO
Frank H. Ross, III            Treasurer/Director            April 1, 1998


/s/ Douglas P. Morris         Secretary/Director            April 1, 1998
Douglas P. Morris


                              Director                      April 1, 1998
Henry Obartuch, II

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